The Petitioner, Travelport Global Distribution Systems B.V. (“Travelport”), and the Respondent, Bellview Airlines Limited (“Bellview”), entered into a Distribution Agreement for the provision of goods and services in Nigeria. The Distribution Agreement provided for arbitration in the U.S. under New York law, pursuant to the arbitration rules of the United Nations Commission on International Trade Law (“UNCITRAL”), but designated a non-existent arbitral body to administer the proceedings. After a dispute arose, Bellview initiated an action in the Federal High Court of Nigeria seeking a declaration that a dispute had arisen between the parties and that Bellview was entitled to refer the dispute to arbitration. However, subsequently, Bellview objected to arbitration, and Travelport filed motions in the United States District Court for the Southern District of New York to compel arbitration and enjoin litigation in Nigeria. Bellview argued that the arbitration agreement was “incapable of being performed” because it designated a non-existent arbitral body. It argued that alternatively, the use of the word “may” in the arbitration agreement meant that arbitration was permissive rather than mandatory.
The United States District Court for the Southern District of New York compelled arbitration pursuant to the Distribution Agreement and issued an anti-suit injunction. The Court determined that the arbitration agreement was governed by the NYC, which was implemented in Chapter Two of the Federal Arbitration Act (“FAA”), and by Chapter One of the FAA, which governed domestic arbitration, because it required arbitration in the United States. Asserting that it was for the Court to determine questions of arbitrability by applying state-law contract principles, the Court concluded that the agreement required arbitration notwithstanding the use of the word “may”. The Court also held that where the overriding intent of the parties was to settle disputes through arbitration, selecting a non-existent arbitral institution did not render the arbitration agreement inoperable. The Court dismissed Bellview’s defenses based on a lack of jurisdiction, improper venue and waiver of right to compel arbitration. Finally, in enjoining litigation in Nigeria, the Court reasoned, based on the requirements for the issuance anti-suit of injunctions, that (i) the parties were identical in both proceedings and (ii) the issues pending before the Nigerian court were dispositive of the issues in the present case. In addition it reasoned that a failure to prevent litigation in Nigeria would cause delay, inconsistent rulings and a race to judgment.

United States / 07 September 2012 / United States, U.S. District Court, Southern District of New York / Federal Insurance Company, as subrogee of Transammonia, Inc.v. Bergesen D.Y. ASA OSLO, as agents of the Norwegian Flag LPG/C “Hugo N” and its owner, General Gas Carrier Corporation, Limited / 12 Civ. 3851(PAE)

The Petitioner, Federal Insurance Company (“Federal Insurance”), sought confirmation of an arbitral award, which the Respondent, Bergesen d.y. ASA, Oslo (“Bergesen”), cross-moved to vacate, arguing that the award was in manifest disregard of the law.
The United States District Court for the Southern District of New York confirmed the arbitral award, holding that Bergesen had not met the heavy burden of proving that the award was in manifest disregard of the law. The Court acknowledged that the arbitral agreement was governed by the NYC and Chapter Two of the Federal Arbitration Act (“FAA”) because it involved non-U.S. parties and was not “otherwise domestic in nature.” However, Chapter One of the FAA, the chapter on domestic arbitration, governed the recognition and enforcement of the arbitral award because it was rendered in the United States. Under Chapter One of the FAA, manifest disregard of the law was a recognizable defense to the recognition or enforcement of the arbitral award. The Court emphasized that great deference was owed to arbitral decisions and that the grounds for judicial review were “severely limited”, i.e. the grounds enumerated under Section 10(a) of the FAA, and manifest disregard of the law. In denying the Respondent’s defense, the Court concluded that the arbitrators had not acted with “egregious impropriety” and that alleged errors in understanding or applying the law, or disregard or misapplication of evidence did not meet the high threshold required for vacatur under a manifest disregard standard.

The parties entered into an exclusive distribution and licensing agreement, which provided for arbitration under the Rules of the International Chamber of Commerce (“ICC”) by a sole arbitrator in London. A dispute arose and the licensor initiated arbitration proceedings. The sole arbitrator rendered an award prohibiting the licensee from further using certain trademarks belonging to the licensor, while at the same time ordering the licensor to make certain payments to the licensee, including payments for its arbitration costs. The licensee sought leave to enforce its award from the Bezirksgericht (Regional Court) Höfe, which essentially granted the request. The licensor appealed, unsuccessfully, to the Kantonsgericht Schyz (Cantonal Court) Schwyz, and subsequently to the Bundesgericht (Swiss Federal Tribunal). The licensor contented that the licensee’s submission of only a partial translation of the English arbitral award into German violated Article IV(2) NYC, which, it argued, mandatorily required the submission of a German translation of the full text of the arbitral award which was sought to be enforced, regardless of whether the court was capable of understanding the award in the English. It also argued that recognition and enforcement of the award would violate Swiss public policy under Article V(2)(b) NYC since the arbitral award ordered it to bear the full costs of the arbitration.
The Bundesgericht dismissed the licensor’s appeal, upholding the decision granting leave to enforce the award. The Bundesgericht stated that there were differing views on the interpretation of Article IV(1) NYC both in academia and in court practice, and found that under Articles 31-33 of the Vienna Convention on the Law of Treaties the provision needed to be interpreted with a view to good faith, in conformity with its common meaning and in the light of its object and purpose. The Bundesgericht stated that the purpose of the NYC was to facilitate the recognition and enforcement of foreign arbitral awards, which required the enforcement-friendly interpretation of its norms. Moreover, the Bundesgericht found that Article IV(2) NYC served the function of enabling the enforcement court to evaluate possible grounds to refuse enforcement under Article V NYC based on a version of the arbitral award in a language that it could understand. The Bundesgericht further recalled that its prior case law indicated that form requirements under Article IV NYC were not to be applied restrictively. It concluded that it would be purely formalistic to require a full translation of the award in the present case, given that the licensee had provided a translation of the award’s dispositive section and of the section on costs that was disputed between the parties and which could have formed the basis of a possible defense under Article V NYC. In addition, the Bundesgericht found that Swiss courts nowadays normally do not depend on a translation in the case of English-language arbitral awards, so that the non-provision of a full translation did not endanger the purpose of Article IV(2) NYC. The Bundesgericht thus concluded that based on a flexible, pragmatic and non-formalistic interpretation of Article IV(2) NYC, the provision of only a partial translation of the arbitral award was sufficient, and that a more restrictive interpretation would run counter to the recognition and enforcement friendly spirit and objective of the NYC. The Bundesgericht also noted that the licensor had not claimed that it required a translation of the full award to safeguard its own legal rights. It also held that since it had interpreted Article IV(2) NYC as not requiring a translation of the entire award, it did not need to decide whether the same result could have been reached by application of more lenient requirements under Swiss domestic law in accordance with Article VII(1) NYC. As regards the licensor’s argument that the recognition and enforcement of the award would violate Swiss public policy, the Bundesgericht held that it did not need to address this defense since the licensor had in this regard simply resubmitted the same arguments that it had previously submitted to the Kantonsgericht, without addressing the Kantonsgericht’s reasoning for why the enforcement of the cost award did not violate Swiss public policy.

Original decision obtained from the registry of the Oberlandesgericht Karlsruhe.

Languages

English

Summary

The Claimant had obtained a favourable arbitration award following arbitration proceedings at the International Chamber of Commerce in San Diego, which granted it certain insolvency creditor claims against the Respondent. The Claimant sought enforcement of the award before the Oberlandesgericht (Higher Regional Court) Karlsruhe, which the Respondent opposed, alleging that the Claimant’s insolvency claims were not arbitrable and that the award violated public policy due to, inter alia, the arbitral tribunal’s alleged erroneous interpretation and application of the law, the conduct of oral hearings at a place different from the seat of the arbitration, the rendering of the arbitral award beyond the regular six-month time limit under Article 24(2) ICC Rules, the alleged sleeping of one of the arbitrators during the arbitration, and the allocation of the entire costs of the arbitration to the Respondent.
The Oberlandesgericht dismissed all of the Respondent’s objections and granted enforcement, reasoning that the Respondent could have raised the arguments in the annulment proceedings under the United States Federal Arbitration Act, but had not done so within the applicable time limits, and was now precluded from raising them in the present enforcement proceedings. The Court found that, while Article V NYC did not contain such a preclusion rule, such a rule would be applicable based on German law since Article VII(1) NYC allowed the application of domestic court practice favorable to the recognition of foreign arbitral awards. The Oberlandesgericht also found that, in any event, the Respondent’s objections against enforcement were unfounded. It considered that disputes regarding rights of an insolvency creditor were capable of being resolved by arbitration and also that the award did not violate German public policy under Article V(2)(b) NYC by confirming insolvency claims which had previously been filed in the insolvency administrator’s list of claims, but had thereafter been listed as contested. The Oberlandesgericht noted that the Respondent had failed to recognize that public policy violations regarding international arbitration awards were to be assessed exclusively on the standard of international public policy and that, accordingly, a refusal of enforcement could be justified on public policy grounds only where the arbitral proceedings showed a grave defect that affected the basis of public and economic life in Germany. It concluded that this was not the case for any of the public policy violations raised by the Respondent. In addition, in relation to the alleged lack of attention of one of the arbitrators, the Oberlandesgericht made clear that the Respondent would have had to raise this issue in the arbitration. Finally, as regards the arbitral tribunal’s alleged misapplication of German law, the Oberlandesgericht stated that it could not consider this aspect due to the prohibition to review the award on the merits.

Around the Guide

The Website

newyorkconvention1958.org

This website was created to host information on the implementation of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, signed in New York on 10 June 1958, with a view of promoting its uniform and effective application throughout the world.

The website provides access to the case-law from a number of jurisdictions on the application of the Convention by domestic courts as well as information on the ratification of the Convention by selected States.

This website was developed by Shearman & Sterling and Columbia Law School, in cooperation with UNCITRAL.